GoldBroker.comDan Popescuhttps://www.goldbroker.com/author/dan-popescu
India’s War on Cash and GoldI just finished reading Kenneth Rogoff’s book, The Curse of Cash, when the rupee notes crisis erupted in India. Rogoff’s book is a defense of banning cash (paper/plastic and coins).
On November 8, also the day of the U.S. election, Narendra Modi, Prime Minister of India, made a surprise announcement that had been kept secret, even from many in the Indian government, that 500 and 1000 rupee notes would no longer be legal tender within 24 hours. The Prime Minister cited the need to fight corruption as justification for the removal of the 500 and 1000 rupee notes. The removal of the 500 and 1000 rupee notes in effect demonetized 86% of India’s existing cash. Half of India’s citizens do not have a bank account and around 25% do not even have an ID card. 97% of the Indian economy is cash-based. This decision made 88% of all outstanding currency no longer usable.
Prime Minister Modi attempted to downplay the shocking ban of existing 500 and 1000 rupee notes by tell...Thu, 01 Dec 2016 06:26:03 +0000https://www.goldbroker.com/news/india-war-on-cash-and-gold-1047
Gold and DeflationSince the start of this gold correction in 2013, the most bearish argument I hear is that there is no risk of hyperinflation or even high inflation, but rather a risk of deflation (or a negative inflation rate, not to be confused with a lower rate of inflation increase, or disinflation).
What to make of it? First, let us define what we mean by inflation. In general, inflation is defined as an increase in the price of most goods and services. But what causes this increase? Is it a change in supply and demand of the goods and services or just an increase or decrease in quantity of money in circulation? If the price increase occurs, as an after-effect, because of an increase in the amount of money in circulation, we have inflation. And this happens when a central bank issues more money than is necessary for the transactions of goods and services to create an illusion of wealth increase. Instead, what happens in that case is rather a loss of value of the currency (d...Tue, 25 Oct 2016 05:15:03 +0000https://www.goldbroker.com/news/gold-and-deflation-1023
The Yuan, SDR and GoldIn recent months we saw a major offensive by China in support for the SDRs while, at the same time, we saw a slowdown, but not a stop, in gold buying for its international reserves. What can we make of it? Is this a change in China’s strategy in favour of fiat SDRs and away from hard gold?
There were several IMF staff notes published in the last six months about the SDRs. China also announced its intention to diversify its international reserves from the US dollar to SDR and is supposed to have already acquired in secret billions of SDRs on the secondary markets through the IMF. Already in 2009, right after the financial crisis, in an article, the president of the People’s Bank of China (PBoC), Dr. Zhou Xiaochuan, proposed that the US dollars be replaced by SDRs. Recent statements and actions indicate a preference by China for the SDRs.
However, in a recent article, I argued that China understands very well the risks and weaknesses of the SDR and it is prepar...Wed, 05 Oct 2016 05:15:56 +0000https://www.goldbroker.com/news/the-yuan-sdr-and-gold-1014
The Debauchment of the CurrencyEconomist John Maynard Keynes described the effects of inflation citing Vladimir Ilyich Lenin this way:
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a mil...Tue, 30 Aug 2016 05:51:31 +0000https://www.goldbroker.com/news/the-debauchment-of-the-currency-1000
Gold and Silver CorrelationWe can’t compare gold and silver without first looking at the chart below of above-ground stock of gold versus the visible gold market. Remember also that almost all of this gold above ground is in the purest form and ready at very low cost to come to market. This stock of gold is called reservation demand. Reservation demand is a demand that is expressed by holding onto something that you own. People who hold gold are demanding it by holding it off the market. Gold, unlike many other commodities, is not consumed, and therefore the traditional models and theories of supply and demand simply do not apply. Of all the gold extracted from the relatively small number of mines, only a tiny fraction is ever “consumed” in the true sense (about 9%), with the overwhelming production added to the ever growing stockpiles of governments, corporations and private investors, along with small amounts of recycled scrap. For gold there is always a large stockpile and it never gets a...Mon, 01 Aug 2016 05:29:38 +0000https://www.goldbroker.com/news/gold-and-silver-correlation-988
The Gold StandardAccording to Mises, money’s function as a medium of exchange is thus the central one, while its store of value and unit of account functions are merely subordinate functions. I would say store of value and unit of account is what makes the medium of exchange marketable. The medium of exchange has to be simple to understand, not only by educated people but also the most uneducated. It has to be easily accessed, not only in ideal circumstances but also in difficult ones. Many things have been tried and have worked in specific regions, for short periods of time, and only in ideal circumstances. Jim Grant says, “Gold is instantly and optically recognizable as money. You don’t have to explain it.” It is the simple nature, divisibility and durability of gold that has made it become universal money. Gold became money because of its physical characteristics (scarcity but still in sufficient quantity, malleability, inertness, durability and uniformity). Many crypto-currency...Wed, 22 Jun 2016 16:17:28 +0000https://www.goldbroker.com/news/the-gold-standard-970